NMDC in a Japanese soup

Expressing serious concern over the state-run mineral giant National Mineral Development Corporation’s (NMDC) proposal seeking hike in realisations from its export iron ore to Japan and South Korean steel giant Posco, commerce ministry has warned that the proposal could jeopardize bilateral trade ties with these nations and suggested that government could reduce export duty on ore exports based on Long Term Agreements (LTA), rolling back enhanced railway freight or by reducing its dividend share in the PSU.

In a draft cabinet proposal to the union cabinet, the ministry pointed out that last year the Japanese Steel Mills (JSMs) had reluctantly agreed to pay the 9.5 per cent increase in bonus/ penalty rates on Bailadila lump ore at the insistence of the Indian side while making it clear that there would be no such increase in bonus next year. “This time due to substantial price increase in lumps, JSMs will probably resist any request from the Indian side to increase the bonus/penalty rates. There is a strong possibility that the export of Bailadila ore by Mineral and Metal Trading Corporation (MMTC) to Japan and Korea may get suspended,”the ministry warned.

The commerce ministry’s concern comes in the wake of the mineral giant voicing serious concern that imposition of 15 per cent ad-valorem export duty and hike in railway freight is ripping through its bottom line and it be allowed to re-negotiate iron ore prices with its Japanese and Korean buyers.

Story continues below this ad

The PSU has said that its realization from exports, due to increased rail freight and export duty will not only be much lower than spot market prices, but will also be lower than domestic LTA price and hence it cannot justify exports to Japan and South Korea.

As of now, India has pending free trade agreements (FTAs) with both Japan as well as South Korea. While the Indo-Japan FTA is being currently negotiated. Asserting that good bilateral relations with all trading partners are crucial for any country today, the commerce ministry official said both the JSMs and Posco don’t have any significant interest in Indian iron ore— combined, both account for roughly 3 million tonne of or—-and can easily move out of the LTA with NMDC.